The hike in VAT on diesel has led to diesel price jumping to Rs 53.38 a litre from Rs 52.61. The diesel rates in the state vary from area to area due to transportation charges.

The opposition party Congress has lashed out at the state government for increasing VAT. Significantly, the fresh hike in value added tax (VAT) on diesel in Punjab came barely after one and half month with new rate of VAT being fixed at 11.25 per cent (excluding 10 per cent surcharge).

Earlier, Punjab government had raised VAT on diesel by one per cent to 9.75 per cent with effect from October 1, the move which had led to fuel prices going up by 55 paise a litre.

As per notification issued by Punjab Excise and Taxation department regarding 'change in rate of diesel', the VAT rate on diesel other than premium diesel has now been revised to 11.25 per cent.

Punjab also levies 10 per cent surcharge on VAT rates. "Because of increase in VAT, the diesel price in Punjab has increased by 77-78 paise a litre," a Ludhiana based fuel pump owner said.

Petroleum dealers said that they received the message from Punjab Excise and Taxation department about increase in VAT on diesel at around 11 am on Sunday in the morning. "After receiving the message, we raised retail prices of diesel," he said.

Notably, the recent reduction in diesel prices by the Centre had caused revenue loss of up to Rs 20-25 crore per annum to Punjab.While Punjab levies tax on petroleum items as per 'ad valorem' method, any increase or decrease in prices of fuel cause affect in tax mobilisation to the state kitty. As per 'ad valorem' method, the tax is charged as per value of goods or services.
Punjab annually collects about Rs 2,100 crore of tax from petrol and diesel. Interestingly, Union Territory Chandigarh, this week, slashed VAT on diesel from 12.5 per cent to 9.68 per cent in order to bring parity with the tax rate in Punjab , thus giving a relief of Rs 1.40 per litre in diesel rates.

Meanwhile, Congress Legislature Party leader Sunil Jakhar described the SAD-BJP government move of raising VAT as anti-farmer and anti-industry.
"Akali-BJP government in Punjab increases VAT on diesel making it costlier from Sunday ... it is an anti farmer, anti industry and ultimately inflationary step ... people of  Punjab are now paying through their nose for bad and wasteful governance. It's time Akali-BJP government explained if this is their idea of  Achay Din," Jakhar said in a statement issued here.

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